Will shareholders be raising a glass to BrewDog following £213m investment?

10 years after starting up with a £20,000 bank loan, Scottish-based craft brewery, BrewDog announced during their 2017 AGM on Saturday, that they are selling a 22.3% stake in the company, valued at £1bn [1]. Founders, James Watt and Martin Dickie, have notably stated in the past that they would not sell the business to a multinational beer maker, and have so far stuck to their word. Instead looking to American private equity firm, TSG Consumer Partners, through whom it’s raised £213m to give the company what they have called ‘the fire power to compete globally’. So what does this all mean for existing Brewdog shareholders?

Who are TSG?

San-Francisco-based TSG are one of the largest and oldest private equity firms in America [2]. With a focus on ‘making minority and majority investments in growing middle-market consumer and retail companies’, and in particular those with products seen as playing an important role in the daily lives of consumers. As a company set up with the intention of ‘making other people as passionate about great craft beer’ as founders, James Watt and Martin Dickie, BrewDog clearly fits the TSG bill.

What does this mean for BrewDog shareholders?

Through the deal the co-founders will take around £100m of the £213m total between them, and the additional £100m will be used in a share buy-out from early investors as well as a sum put into business growth [3]. However, with over 55,000 ‘Equity Punks’, the idiosyncratic name of Brewdog shareholders , there has unsurprisingly been the overbearing question of the returns that can be expected.

BrewDog have stated that for those who bought shares during their first crowdfunding round back in 2010 they can potentially make a return of 2,800% of the original value, whilst those who invested in the latest round in April 2016 are set to see an increase of 177% [4]. This opportunity will be given to Brewdog shareholders over the course of the next week when they will be able to sell their shares. However, it is perhaps not as ‘hunky-dory’ as it appears at first glance with the following restrictions in place:

Shareholders can sell up to 15% of their holdings.

Shareholders are capped at selling a maximum of 40 shares per investor.[5]

With almost 90% of investors falling into this category there may be a few disgruntled ‘punks’ unable to sell their full holdings, though the company’s ambitious future plans may settle their concerns.

How does the future look for BrewDog?

From opening their first pub in Aberdeen in 2010, to revenues of £71m in 2016 there has clearly been tremendous growth from the brewery [6]. With further expansion on track for a new brewery in America, an announcement of intentions to open the world’s first crowdfunded beer hotel, and the hope to launch in both Asia and Australia shortly after their plans remain in-line with the forward-thinking nature of the co-founding duo.

Despite what may look like a ‘mainstream’ approach to financing for a company bestowed on its ‘punk’ nature, co-founder Watt has said they remain committed to their die-hard beer fans, and this move will not cause dissolution to this. The founders will remain majority stakeholders in the business and insist they are ‘more laser focused than ever before’ on the goal of existing to make other people as passionate about craft beer as they are.

About the author

Lily Bridgwood

Lily is the Partnerships Associate at OFF3R. She has previous work experience in both the corporate and start-up environments. She joined the OFF3R team in October having recently graduated with First-Class Honours in International Business from the University of Edinburgh.

Risk Warning

Your capital is at risk. The value of your investments can go down as well as up and you may get back less than you invest. Please seek independent financial advice if you are unsure whether an investment is suitable for you. For more information, please see our full risk warning.